In this photo illustration, a silhouetted individual is seen holding a mobile phone with a Sora of ChatGPT OpenAI logo displayed in the background. (Photo Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)
(NEW YORK) — The Walt Disney Company on Thursday announced plans to invest $1 billion in artificial intelligence company OpenAI, in a deal that will grant the company access to copyrighted characters from “Star Wars,” Marvel and other properties for users of AI short-form video generator Sora.
“The rapid advancement of artificial intelligence marks an important moment for our industry, and through this collaboration with OpenAI we will thoughtfully and responsibly extend the reach of our storytelling through generative AI, while respecting and protecting creators and their works,” Disney CEO Bob Iger said in a statement on Thursday.
Disney is the parent company of ABC News.
This is a developing story. Please check back for updates.
David Ellison, chairman and chief executive officer of Paramount Skydance Corp., center, outside the New York Stock Exchange (NYSE) in New York, US, on Monday, Dec. 8, 2025. (Michael Nagle/Bloomberg via Getty Images)
(NEW YORK) — Paramount launched a hostile bid for Warner Bros. Discovery this week, just days after Netflix struck a deal to acquire the legacy media company.
The rival multi-billion dollar efforts to purchase streaming platform HBO Max and movie studio Warner Bros., among other assets, could upend the media industry and shape content viewed by hundreds of millions of people.
For now, the outcome remains highly uncertain. Any acquisition of Warner Bros. Discovery would likely be reviewed by the Trump administration, which could move to block a proposed merger over anti-monopoly concerns, according to antitrust experts from Vanderbilt University, the University of Tennessee and the Cardozo Law School.
The government approval process could take anywhere from several months to more than a year, the experts said.
The Department of Justice did not immediately respond to ABC News’ request for comment.
Here’s what to know about the government hurdles faced by a potential blockbuster deal to acquire Warner Bros:
What government hurdles await a bid from Netflix or Paramount?
Streaming giant Netflix appeared to win the bidding war for Warner Bros. Discovery last week, when the two firms announced a merger. Within days, however, Paramount launched a hostile bid for Warner Bros. Discovery, meaning Paramount plans to appeal to shareholders in an effort to overcome the wishes of management.
The $108 billion bid from Paramount encompasses the HBO Max streaming service, the Warner Bros. film production company and cable channels such as CNN. Netflix established its agreement with Warner Bros. Discovery at a lower price of $83 billion, though the Netflix offer excluded the cable channels.
Ultimately, the prevailing bid for Warner Bros. Discovery — whether from Paramount or Netflix — will likely face scrutiny from the Trump administration that could doom the proposal if agency officials consider the newly created company in violation of anti-monopoly law, experts said.
An antitrust review of the merger would draw on a standard established in the Clayton Antitrust Act of 1914, some experts said. The law prohibits mergers in which “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”
As part of its assessment, Trump officials would examine the market share of the newly created company, especially with regard to whether it could result in higher prices for consumers or reduced fees for creators selling content to media companies, Maurice Stucke, a law professor at the University of Tennessee, told ABC News.
An antitrust review could also focus on the potential impact on content distributors, such as movie theaters, Stucke noted.
“It’s not just a question of higher prices,” Stucke said. “It could be less content, less choice, less innovation and a decrease in quality — all of those could be a concern.”
If the Trump administration considers a potential merger illegal, a federal agency could seek a settlement under terms that would assuage government concerns.
Typically, the Federal Trade Commission or the Department of Justice (DOJ) are tasked with settlement negotiations or legal action tied to antitrust concerns.
In June, for instance, the DOJ announced a settlement agreement that permitted Hewlett Packard Enterprise’s (HPE) $14 billion purchase of Juniper Networks, a digital infrastructure firm. The settlement requires HPE to divest a part of its business and license Juniper Network’s critical software to competitors, the DOJ said.
If a settlement between the government and the firm cannot be reached, the Trump administration may move to sue the company in an effort to block the merger. A lawsuit would present a task for the Trump administration, Stucke said: “How do you prove this in court?”
The potential merger could also receive scrutiny from state-level regulators or the European Union.
How may regulators weigh a bid from Netflix or Paramount?
Proposals from Netflix or Paramount could each raise antitrust concerns, but for slightly different reasons, some experts said.
Netflix is the most popular streaming service, boasting 300 million subscribers worldwide as of late 2024, the most recent time for which data is available. The company accounts for 46% of mobile app monthly active users in global streaming, according to a CNBC analysis of data from intelligence firm Sensor Tower. After acquiring HBO Max, that share of app users would rise to 60%, CNBC said.
“Netflix has studios and a big chunk of streaming,” Sam Weinstein, a professor at the Cardozo School of Law who focuses on antitrust, told ABC News. “If you think that’s a market, they might have a big enough chunk that they can raise prices to impact streamers.”
“On the other hand, they’re a big buyer of projects. Creators might think, ‘Well now there’s one less studio to bid on my work,” he added.
Netflix may seek a broad definition of the market that includes consumers of online video, such as YouTube and short-form social media content, rather than merely traditional streaming, according to Weinstein.
“In that larger market, Netflix has a much smaller share,” Weinstein said.
Speaking to reporters on an earrings call on Friday, Netflix co-CEO Ted Sarandos voiced confidence about government approval of the merger.
“This deal is pro-consumer, pro-innovation, pro-worker, it’s pro-creator, it’s pro-growth,” Sarandos said, adding that the firm would “work really closely with all the appropriate governments and regulators.”
Paramount+ counts a smaller streaming audience than Netflix, recording about 79.1 million subscribers in September 2025, or less than a third of the audience of Netflix. The comparatively small market share for streaming could lessen concern among regulators about the potential to push up prices for consumers, some experts said.
Still, Paramount boasts a movie studio of its own, Paramount Pictures, presenting a risk of decreased competition for content production in the event of a potential merger, Rebecca Allensworth, a law professor at Vanderbilt University, told ABC News. In turn, TV shows or movies could command lower prices for creators, while actors or other workers could lose out on pay, she noted.
“At this moment, you can approach either Warner or Paramount as competitive studios,” Allensworth said. “This will take away one of those options.”
Speaking to CNBC on Monday, Paramount Skydance CEO David Ellison addressed antitrust concerns, saying the offer from Paramount compares favorably to the one from Netflix when considered through the lens of preserving a competitive industry.
“What we’re creating by putting these two companies together is a real competitor to Netflix, a real competitor to Amazon, a real competitor to Disney — not something that is so anti-competitive,” Ellison said.
Could the Trump administration take into account issues unrelated to competition?
The Trump administration may retain leeway to consider issues unrelated to competition, including potential agreements surrounding coverage at new outlets such as Warner Bros. Discovery-owned CNN, some experts said, noting the murky nature of antitrust law.
“A speeding violation or murder is fairly clear cut,” Stucke said. “With bringing an antitrust claim, there’s a lot of discretion.”
Trump, a frequent critic of major news outlets including CNN, told reporters on Sunday that he would “be involved” in the decision on a potential Warner Bros. Discovery merger. Trump’s willingness to take a direct role in deal evaluation departs from standard practice in which the president has sought to distance himself from antitrust reviews, Weinstein noted.
“The norm is that the White House wouldn’t get involved — that definitely isn’t happening here,” he said.
Speaking on the red carpet at the Kennedy Center honors on Sunday, Trump raised antitrust concerns about a potential Netflix acquisition, saying the deal “could be a problem” due to the market share of the new firm.
The circumstances afford the Trump administration leverage to extract potential concessions from a buyer like Netflix or Paramount, since in each case the purchase presents legitimate antitrust issues, granting Trump an opportunity to exercise robust oversight of the merger while seeking a favorable settlement, Allensworth said.
“Because antitrust law would likely find at least serious problems with the merger, Trump can make that all go away on terms that he agrees to,” Allensworth added.
Weinstein agreed, suggesting that their may be a court-enforceable agreement.
“It’s entirely possible you might have a consent decree with conditions that are non-competitive,” Weinstein said.
As part of a process seeking Federal Communications Commission approval for its $8 billion acquisition of Paramount earlier this year, Skydance agreed to a series of concessions that appeared to align with the views of the Trump administration, including agreements to forego implementation of diversity, equity or inclusion programs and appoint an ombudsman.
In a statement when the acquisition was approved in July, FCC Chairman Brendan Carr said the changes aimed to improve public trust in mainstream news outlets like CBS.
“Americans no longer trust the legacy national news media to report fully, accurately, and fairly. It is time for a change,” Carr said. “That is why I welcome Skydance’s commitment to make significant changes at the once storied CBS broadcast network.”
Experts underscored the uncertainty surrounding the outcome of a potential review of the Warner Bros. Discovery merger.
“If it’s a straight-up merger under antitrust guidelines, that’s one thing,” Weinstein said. “If you can win favor of the administration by making promises, that makes the deal unpredictable.”
The Federal Reserve logo is visible on the William McChesney Martin Jr. Building on December 9, 2025 in Washington, DC. (Andrew Harnik/Getty Images)
(WASHINGTON) — The Federal Reserve is set to announce its latest adjustment of interest rates on Wednesday, potentially slashing borrowing costs for the third time this year in an effort to boost sluggish hiring.
Top officials at the Federal Reserve have displayed a rare degree of public disagreement over a possible interest rate cut. Inflation has picked up in recent months alongside the hiring slowdown, posing a risk of an economic double-whammy known as “stagflation.”
The Fed is stuck in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment. To address pressure on both of its goals, the Fed primarily holds a single tool: interest rates.
If the Fed holds interest rates steady as a means of protecting against tariff-induced inflation, it risks a deeper slowdown of the labor market. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a hiring slowdown, it threatens to boost spending and worsen inflation.
“We have one tool,” Fed Chair Jerome Powell said at a press conference in Washington, D.C., in October. “You can’t address both of those at once.”
Lately, sentiment shifted in favor of a rate cut as some influential central bankers voiced openness toward the move, futures markets showed.
The chances of a quarter-point interest rate cut stand at about 87%, surging from a level as low as 30% last month, according to CME FedWatch Tool, a measure of market sentiment.
The prospects appeared to move in response to a murky jobs report and public statements from two allies of Powell on the committee charged with setting rates.
Last month, a jobs report for September sent mixed signals about the labor market. Employers added far more workers than expected in September, though hiring fell short of a breakneck clip. Meanwhile the unemployment rate ticked up to 4.4%, a low figure by historical standards but the highest recorded since October 2021.
New York Fed President John Williams, who is often in lockstep with Powell, days later voiced openness toward a rate cut, telling reporters he still saw “room for a further adjustment in the near term.”
Soon afterward, San Francisco Fed President Mary Daley took a similar position, telling reporters she sees room “for a further adjustment in the near term.” Daley, who isn’t voting on interest rates this year, is widely viewed as a supporter of Powell.
A quarter-point interest rate cut would reduce the Fed’s benchmark rate to a level between 3.5% and 3.75%.
That figure would mark a significant pullback from a peak in 2023. At the outset of the pandemic, interest rates stood at 0%.
Still, a reduction of interest rates could offer some relief for mortgage and credit card borrowers. Savers, however, stand to lose income as interest rates decline for accounts held at banks.
In this photo illustration, a smartphone displays the Paramount Skydance logo in front of a blurred Warner Bros. Discovery emblem, on December 6, 2025, in Chongqing, China. (Photo illustration by Cheng Xin/Getty Images)
(NEW YORK) — Paramount said Monday it is making a bid to acquire Warner Bros. Discovery, swooping in just days after Netflix announced a $83 billion deal to purchase a large part of the media giant.
Warner Bros. Discovery (WBD) shareholders would be offered $30 per share, which represents a 139% premium to the stock price as of Sept. 10, 2025, Paramount said.
“Our public offer, which is on the same terms we provided to the Warner Bros. Discovery Board of Directors in private, provides superior value, and a more certain and quicker path to completion,” David Ellison, chairman and CEO of Paramount, said in a statement. “We believe the WBD Board of Directors is pursuing an inferior proposal which exposes shareholders to a mix of cash and stock, an uncertain future trading value of the Global Networks linear cable business and a challenging regulatory approval process. We are taking our offer directly to shareholders to give them the opportunity to act in their own best interests and maximize the value of their shares.”
This is a breaking news story. Please check back for updates.
(NEW YORK) — Fears of an artificial intelligence bubble have rattled the stock market in recent weeks and set off concern among critics about a wider risk to the U.S. economy.
A surge of AI spending accounted for roughly two-thirds of gross domestic product growth over the first half of 2025, JPMorgan Asset Management found, outpacing the contribution made by hundreds of millions of U.S. consumers. Many of the nation’s largest companies have poured funds into the chips and data centers necessary to operate AI.
A central question looms over the fate of the technology and the trillions of dollars being spent to develop it: Will AI deliver the type of profits that could turn the product into a moneymaker?
Proponents say a lag between the buildout of AI infrastructure and an onrush of gains is to be expected, pointing to a similar lull after the introduction of other watershed technologies, such as the internet. The widespread adoption of products like OpenAI’s ChatGPT has revealed a massive potential customer base, they add, noting AI firms have prioritized product development over profits.
Critics, however, say the considerable costs have put pressure on AI to deliver stratospheric profits, but little evidence suggests businesses or everyday users will get enough value to warrant forking over a mountain of cash. The technology must deliver within years rather than decades, they add, since the current level of spending cannot be sustained.
“It’s not particularly unusual for a market at this early stage to not be making much profit,” Paul Kedrosky, a venture capitalist and research fellow at MIT’s Institute for the Digital Economy, told ABC News. “Of course, the difference is most markets at this stage aren’t also spending a trillion dollars.”
AI boosters and skeptics alike have raised alarm about the economic stakes. “A reversal would risk recession. We can’t afford to go backwards,” David Sacks, a venture capitalist and White House czar for crypto and AI, said in a post on X on Monday.
Gary Marcus, a professor emeritus at New York University and author, who often criticizes hype surrounding AI, said in a Substack post in September: “It’s not going to be pretty when the music stops.”
A “bubble” is a term used to describe a market in which an asset’s price far outpaces its value on the market. Questions centering on the productivity gains and profitability of AI take up the task of assessing the economic value of the new technology.
Chip giant Nvidia has delivered major profits selling the semiconductors behind AI, becoming the most valuable company in the world by market capitalization. Such success indicates appetite for the building blocks of AI rather than its end uses, however.
For now, AI has failed to achieve gains on a scale near its immense costs, some analysts said. A product like AI would typically generate revenue in the form of sales either direct to consumers or to third-party businesses using the technology to enhance their offerings. AI has faced challenges on both fronts, some analysts said.
Roughly 95% of businesses invested in AI have failed to make money off of the technology, an MIT study in July found, estimating the combined amount spent by the firms is around $40 billion.
“Despite high-profile investment, industry-level transformation remains limited,” the study said.
Consumer-driven profits have also proven elusive. OpenAI’s ChatGPT, for example, boasts about 800 million weekly active users, making it one of the fastest-growing apps ever. That user base makes up about a quarter of the 3 billion monthly active users combined on the array of apps offered by Meta, a company that generated more than $50 billion over a recent three-month period. But OpenAI’s sales do not come close.
OpenAI CFO Sarah Prior told CNBC in September the company is on pace to earn about $13 billion in revenue over the course of 2025, which amounts to $3.25 billion per quarter. On the BG² podcast earlier this month, OpenAI CEO Sam Altman said the company is generating “well more revenue than that.”
Revenue is “growing steeply,” Altman added. “We are taking a forward bet that it will continue to grow, and that not only will ChatGPT keep growing, but we will be able to become one of the important AI clouds, that our consumer device business will be a significant and important thing, that AI that can automate science will create huge value.”
Some analysts said the rapid adoption of chatbots underscores the usefulness of the technology, noting that it paves the way for a potentially significant revenue stream if firms were to populate the AI assistants with advertisements or charge for access.
“It’s the fastest adoption of basically any consumer technology that we know about,” Ethan Mollick, a professor of management at the University of Pennsylvania who studies AI, told ABC News. “There is a path to making money.”
Arun Sundararajan, a professor of entrepreneurship at New York University, said a delay in uptake from businesses is to be expected for a potentially paradigm-shifting technology like AI.
“It’s true that we haven’t yet seen evidence of significant productivity gains from AI investments, but I’m not surprised,” Sundararajan said. “At the early stages of the rollout of a technology like this, there’s a lot of experimentation and learning.”
“As businesses start to understand how to fundamentally change the way that they work using this technology, that’s when you start to see the big productivity gains,” Sundararajan added.
Other analysts disagreed about the likelihood of profits, pointing in part to the challenge posed by infrastructure costs associated with AI.
For many digital products such as software or smartphone apps, the profitability owes to the relatively low cost of providing the service on a massive scale, Kedrosky said. For instance, the initial cost burden of developing a website is significant, but once completed, a website can reach millions of users with little extra cost.
For AI, however, the energy and computational costs increase in proportion to a given number of chat prompts or users, meaning the technology lacks such low-cost scalability.
“Every time you prompt an AI model, it eats up costs to maintain and cool servers. Those costs rise with the number of users. That’s a problem,” Kedrosky said.
The scale of investment also places pressure on AI companies to deliver major profits within a limited timeframe, since the current level of financing cannot continue into perpetuity, Andrew Odlyzko, an emeritus University of Minnesota mathematics professor who focuses on financial bubbles, told ABC News.
“The problem is when you talk about investments in data centers in the trillions of dollars and do the basic financial arithmetic of how much revenue you have to bring in to justify that, it gets into figures larger than total revenues of Google,” Odlyzuko said.
To be sure, some analysts said the technology remains in an early stage of its development, making the outcome uncertain.
“We’re in the early innings,” Vasant Dhar, a professor of data science at New York University who believes AI will ultimately deliver significant profit, told ABC News. “It remains to be seen what form it will take.”
(NEW YORK) — Online shoppers set a record high on Thanksgiving, paving the way for gangbusters performance on Black Friday, Adobe data showed.
Digital spending on Thanksgiving jumped 5% from a year earlier, totaling $6.4 billion and exceeding Adobe’s expectations, the firm said.
The company also expects Black Friday shoppers to set a new record, outpacing last year’s total by more than 8%.
Adobe attributed the strong performance on Thanksgiving to better-than-anticipated discounts, especially for electronics. Discounts also touched an array of products from furniture to appliances to toys.
“Given the strength of Thanksgiving deals, Adobe is adjusting its discount forecast for the big shopping days coming up,” Adobe said in a statement to ABC News. “Deals are now expected to be on par with the elevated levels seen in the last holiday shopping season.”
A surge in the popularity of AI retail assistants also contributed to the nationwide shopping spree, Adobe said. AI-driven traffic to online sellers soared 725% compared to last year, the firm said, stemming primarily from chatbots designed to aid consumers.
Shoppers who arrived at a retail website from an AI service were 54% more likely to make a purchase than those who did not, Adobe said.
“The magnitude of discounts was the big story on Thanksgiving yesterday, as retailers leaned into delivering great deals to drive consumer demand online,” Vivek Pandya, lead analyst at Adobe Digital Insights, told ABC News in a statement.
“This was further propped up by impulse-led mobile shopping and the use of generative AI which assisted shoppers in locating the best deals, two trends that helped deliver higher-than-expected overall spend on Thanksgiving,” Pandya added.
The early returns for the holiday shopping season arrive at a wobbly moment for the U.S. economy.
Inflation has picked up in recent months, putting price increases a full percentage point above the Fed’s target of 2%. Meanwhile, hiring has slowed, posing a risk of an economic double-whammy known as “stagflation.”
Alongside those headwinds, consumer spending among middle- and low-income Americans has slowed, triggering warnings from restaurant giants such as McDonald’s and Chipotle. A report this month showed consumer sentiment has fallen to its lowest point since a peak of pandemic-era inflation in 2022, University of Michigan data showed.
Retailers hope shoppers defy these trends over the holiday season, when spending typically surges. The outcome could hold significant stakes for the wider economy, since consumer spending accounts for about two-thirds of U.S. economic activity.
(NEW YORK) — Gas prices stand close to their lowest level in four years as tens of millions of people prepare to travel over the Thanksgiving holiday.
The national average for a gallon of gas on Monday tallied at $3.07, which amounts to a slight uptick from a year ago, AAA data showed. But gas prices for each of the last two years have come in below Thanksgiving Day gas prices going back to 2020, when the pandemic slashed demand and cratered prices.
Twenty-eight states boast average gas prices below $3, spanning from Colorado to New Hampshire to Georgia, according to AAA. Oklahoma, the state with the nation’s lowest gas prices, offers drivers a gallon for an average price of $2.50.
Nearly 82 million people are expected to travel at least 50 miles from their home over Thanksgiving, according AAA’s forecast.
The decline in gas prices is owed in part to a steep drop in the cost of crude oil, the underlying commodity that refineries turn into gas, Patrick de Haan, the head of petroleum analysis at GasBuddy, told ABC News Live. The global benchmark price of Brent crude oil has fallen about 17% since June, clocking in at about $63.40 per barrel.’’
The oil price drop has coincided with the completion of maintenance season for refineries, meaning fuel output is set to grow as facilities reopen capacity previously closed for upkeep, de Haan added.
“With refinery maintenance now wrapping up, that’s going to mean that refineries are able to ramp up oil into their plants,” de Haan said.
Meanwhile, demand for gas has fallen as the busy summer traveling season has given way to an autumn slowdown, putting additional downward pressure on prices.
“Despite the burst of gasoline demand that will occur during Thanksgiving week, overall demand is low this time of year, which helps keep pump prices down,” AAA said in a blog post last week.
Still, prices vary significantly by state.
Drivers in California, the state with the nation’s highest gas prices, pay an average of $4.60 per gallon. Four other states, including Oregon and Alaska, feature average prices above $3.50 a gallon.
By contrast, some gas stations in Texas and Oklahoma tout gas prices as low as nearly $2 per gallon, de Haan said.
“Crossing state lines – that’s a danger zone for gas prices,” de Haan added.
Gas prices may drop even lower, according to de Haan. Gas supply is expected to increase as additional refineries complete maintenance, while demand often eases during the cold winter months.
Those trends could bode well for the next major holiday.
“As we get closer to Christmas, I think the news will continue to improve with gas prices potentially falling below $3 per gallon in the next few weeks,” de Haan said.
(NEW YORK) — Blockbuster earnings from chip giant Nvidia this week appeared to rebuke concerns about an artificial-intelligence bubble, briefly ending a days-long slump in the stock market.
“It’s fair to say that Nvidia’s results have completely changed the market mood and pushed out any bubble fears for another day,” said Jim Reid, a research strategist at Deutsche Bank, in a memo to clients early Thursday morning, just hours after the earnings.
But the market went on to offer little reassurance. Shares of Nvidia fell almost 3% in the first post-earnings trading session. The major stock indexes also dropped, underscoring the importance of the technology for Wall Street and the overall economy, which have both come to rely on massive AI spending to propel growth.
Nvidia recorded $57 billion in sales over three months ending in October, the company said on Wednesday, setting a quarterly sales record and demonstrating near-bottomless demand for the semiconductors at the heart of AI.
Still, critics say such appetite for the building blocks of AI has far outpaced the technology’s end uses and financial returns. AI hasn’t delivered much profit, they argue, despite up-front costs totaling hundreds of billions of dollars spent on data centers and chips.
Proponents strongly disagree, pointing to the rapid adoption of products like ChatGPT and counseling patience as other uses of the technology take hold. To hear them tell it, AI is set to augur a tech transformation like the internet or electricity, meaning the hype will ultimately bear out even if some firms falter along the way.
“There is no question that Nvidia will make a bunch of money,” Gary Marcus, a professor emeritus of psychology and neuroscience at New York University, who specializes in AI, told ABC News. “There are many questions about where the market is headed after this initial burst of enthusiasm.”
For his part, Nvidia CEO Jensen Huang rejected AI-related worries during an earnings call on Wednesday.
“There’s been a lot of talk about an A.I. bubble,” Huang said. “From our vantage point, we see something very different.”
The economy is undergoing a technological sea change that extends beyond generative AI, Huang said, noting the rise of advanced software such as cloud computing as well as AI-driven physical products — all of which increasingly run on Nvidia chips.
“Nvidia corporation is unlike any other accelerator,” Huang added.
AI spending is expected to total $375 billion this year, jumping to about $500 billion by the end of 2026, UBS Global Wealth Management found in August. For reference, the half-trillion to be spent on AI next year would be roughly equivalent to the gross domestic product of Singapore.
The AI boom has helped propel U.S. economic growth. Such spending added a 0.5 percentage point boost to annualized U.S. GDP growth over the first half of 2025, accounting for about one-third of economic activity, Pantheon Macroeconomics said.
But analysts fearful of an AI bubble warn of what they consider immense costs, saying energy needs and chip production have saddled the balance sheets of firms developing and operating AI models. Profits may not come for years, if at all, they warn. OpenAI said it expects to begin generating substantial profits in 2030.
Speaking to reporters earlier this year, OpenAI CEO Sam Altman acknowledged frenzied investor enthusiasm but signaled confidence about the long-term outlook for the industry.
“When bubbles happen, smart people get overexcited about a kernel of truth,” Altman said. “Are we in a phase where investors as a whole are overexcited about A.I.? My opinion is yes. Is A.I. the most important thing to happen in a very long time? My opinion is also yes.”
Tech giants like Amazon and Google retain the capacity to spend without taking on sizable debt, but smaller players require loans, risking credit defaults if the technology fails to deliver on the up-front costs, Marcus said. The potential unpaid loans could strain banks and put pressure on the wider financial system, he added.
“A big question is how much the banks have been propping this up: What will the blast radius be?” Marcus said.
Proponents of AI say such worries are overblown. They point to the popularity of products like AI chatbot ChatGPT, which boasts about 800 million weekly users. Millions of additional users avail themselves of xAI’s Grok, Google’s Gemini and Meta’s MetaAI.
Last year, Apple unveiled AI-fueled tools for its iPhones, Mac and iPad. Some firms are developing a new wave of AI-equipped robots to perform tasks in people’s homes and in workplaces like logistics and warehouses.
“This is the fastest adoption of any technology by consumers by far,” Lynn Wu, a professor of operations, decisions and information at the University of Pennsylvania, told ABC News. “This is a general purpose technology that will be adopted everywhere.”
The profitability of the technology will be made apparent over time as consumers and businesses identify its best uses, Wu added.
“When a general purpose technology — like electricity or the internet — is being adopted, firms and people don’t know how to use it,” Wu said. “We haven’t envisioned how to use this paradigm yet.”
Still, Wu cautioned, an AI bubble likely exists, though it isn’t dangerous. Wu compared the current state of the industry to the internet era before the dot-com bubble, when a host of firms went belly up but the technology reoriented the economy and established corporate giants.
“If you ask me flat out — yes or no — are we in a bubble? The answer is yes,” Wu said. “But the bubble isn’t necessarily a bad bubble.”
(NEW YORK) — Stocks ticked downward in midday trading on Thursday, wiping out a rally earlier in the day driven by blockbuster earnings from chip giant Nvidia and a stronger-than-expected jobs report.
The Dow Jones Industrial Average fell about 60 points, or 0.1%, while the S&P 500 declined 0.2%. The tech-heavy Nasdaq fell 0.3%.
Those returns marked a reversal from highs earlier in the day. Previously, the Dow had risen 1.2%, while the S&P 500 had jumped 1.8% and the Nasdaq had spiked 2.5%.
Shares of Nvidia, the $4.7 trillion juggernaut behind many of the chips fueling artificial-intelligence products, ticked down 0.1% in midday trading after having surged upward earlier in the day.
A stock market selloff over recent days underscored the uncertainty looming over the economy as some investors warned of an AI bubble. The earnings blowout from Nvidia late Wednesday appeared to rebuke such concerns, however, temporarily reviving enthusiasm for an AI trade that has propelled much of the market gains this year.
The S&P 500 has soared 15% in 2025, while the Dow has climbed 10%. The Nasdaq has increased 19% this year.
Investors also appeared to draw optimism from a jobs report on Thursday morning, which showed far more hiring than economists’ expected. The fresh data defied a hiring slowdown that took hold over the summer.
The U.S. added 119,000 jobs in September, according to data from the U.S. Bureau of Labor Statistics. That figure marked an acceleration from the previous month, and it exceeded an average of nearly 100,000 jobs added per month over the first half of 2025.
The report included a downward revision for the month of August, however, slashing performance from 22,000 jobs gained that month to 4,000 jobs lost.
An earnings release from Walmart on Thursday morning also exceeded revenue expectations, offering some reassurance about the health of consumer spending.
Inflation has picked up in recent months while hiring has ratcheted down, posing a risk of an economic double-whammy known as “stagflation.”
Those economic conditions have put the Federal Reserve in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment.
In recent months, concern has tilted toward strain in the labor market, prompting the central bank to reduce interest rates a quarter of a percentage point at each of its last two meetings.
On Thursday morning, markets appeared to digest the news as favorable toward a potential interest rate cut at the Fed’s meeting next month. The odds of a quarter-point rate cut ticked up from 33% on Wednesday afternoon to 43% on Thursday morning, according to the CME FedWatch Tool, a measure of market sentiment.
(NEW YORK) — Stocks rallied in early trading on Thursday, just hours after blockbuster earnings from chip giant Nvidia and a stronger-than-expected jobs report.
The Dow Jones Industrial Average jumped nearly 600 points, or 1.2%, while the S&P 500 climbed 1.8%. The tech-heavy Nasdaq soared 2.5%.
Shares of Nvidia, the $4.7 trillion juggernaut behind many of the chips fueling artificial-intelligence products, surged more than 4%.
A stock market selloff over recent days underscored the uncertainty looming over the economy as some investors warned of an AI bubble. The earnings blowout from Nvidia late Wednesday appeared to rebuke such concerns, however, reviving enthusiasm for an AI trade that has propelled much of the market gains this year.
The S&P 500 has soared 15% in 2025, while the Dow has climbed 10%. The Nasdaq has increased 19% this year.
Investors also appeared to draw optimism from a jobs report on Thursday morning, which showed far more hiring than economists’ expected. The fresh data defied a hiring slowdown that took hold over the summer.
The U.S. added 119,000 jobs in September, according to data from the U.S. Bureau of Labor Statistics. That figure marked an acceleration from the previous month, and it exceeded an average of nearly 100,000 jobs added per month over the first half of 2025.
The report included a downward revision for the month of August, however, slashing performance from 22,000 jobs gained that month to 4,000 jobs lost.
An earnings release from Walmart on Thursday morning also exceeded revenue expectations, offering some reassurance about the health of consumer spending.
Inflation has picked up in recent months while hiring has ratcheted down, posing a risk of an economic double-whammy known as “stagflation.”
Those economic conditions have put the Federal Reserve in a bind, since the central bank must balance a dual mandate to keep inflation under control and maximize employment.
In recent months, concern has tilted toward strain in the labor market, prompting the central bank to reduce interest rates a quarter of a percentage point at each of its last two meetings.
On Thursday morning, markets appeared to digest the news as favorable toward a potential interest rate cut at the Fed’s meeting next month. The odds of a quarter-point rate cut ticked up from 33% on Wednesday afternoon to 43% on Thursday morning, according to the CME FedWatch Tool, a measure of market sentiment.
